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Cyprus Concentrated Solar Power ProjectReportOrgos (Location 4)Student No. – XXXX MANU9M6 2Table of Contents1.0 Introduction ……………………………………………………………………………………………………………………………32.0 Project Analysis ……………………………………………………………………………………………………………………….32.1 Schedule Analysis…………………………………………………………………………………………………………………32.1.1 Network Diagrams …………………………………………………………………………………………………………42.1.2 Gantt Charts………………………………………………………………………………………………………………….42.1.3 Workforce …………………………………………………………………………………………………………………….42.2 Financial Analysis …………………………………………………………………………………………………………………42.2.1 Investment Appraisal ……………………………………………………………………………………………………..52.2.1.1 Internal Rate of Return (IRR) …………………………………………………………………………………….52.2.1.2 Return on Investment (ROI)………………………………………………………………………………………52.2.1.3 Payback Period………………………………………………………………………………………………………..62.2.1.4 Total Profit ……………………………………………………………………………………………………………..62.2.2 Proposed Options ………………………………………………………………………………………………………….72.3 Sensitivity Analysis ……………………………………………………………………………………………………………….72.4 Final Decision ………………………………………………………………………………………………………………………83.0 Conclusion………………………………………………………………………………………………………………………………94.0 Recommendations …………………………………………………………………………………………………………………..95.0 Appendix ………………………………………………………………………………………………………………………………105.1 Appendix 1 (Network Diagrams)…………………………………………………………………………………………..105.1.1 Original Plan (No Alterations) ………………………………………………………………………………………..105.1.2 Hot Salt Storage Included ……………………………………………………………………………………………..105.1.3 1 Extra Installation Team ………………………………………………………………………………………………115.1.4 2 Extra Transport Teams & 2 Extra Installation Teams………………………………………………………115.1.5 Hot Salt Storage Included & 2 Extra Transport Teams & 2 Extra Installation Teams ……………..125.2 Appendix 2 (Gantt Charts) …………………………………………………………………………………………………..125.2.1 Original Plan (No Alterations) ………………………………………………………………………………………..125.2.2 Hot Salt Storage Included ……………………………………………………………………………………………..125.2.3 1 Extra Installation Team ………………………………………………………………………………………………135.2.4 2 Extra Transport Teams & 2 Extra Installation Teams………………………………………………………135.2.5 Hot Salt Storage Included & 2 Extra Transport Teams & 2 Extra Installation Teams……………..135.3 Appendix 3 (Investment Appraisal) ………………………………………………………………………………………145.3.1 Original Plan (Subsidy) ………………………………………………………………………………………………….145.3.2 Hot Salt Storage Included ……………………………………………………………………………………………..145.3.3 Hot Salt Storage Included (Subsidy)………………………………………………………………………………..155.3.4 2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)………………………………………..155.4 Appendix 4 (IRR Graph)……………………………………………………………………………………………………….16Student No. – XXXX MANU9M6 3Table.11.0 IntroductionSolar energy is a massive resource contributing to a sustainable eco-friendly environment. This report willcontain a project plan with various options at the potential Orgos site in Cyprus, a detailed analysis for thevarious options are included focusing on both scheduling and financial aspects of each project leading tomy own recommendations on the project ahead.2.0 Project AnalysisThe project has many various options with how it can be carried out, each having a different impact on thescheduling and finances of the project. These options range from negotiation of price and subsidy fromthe Cypriot government, inclusion of a hot salt thermal energy storage or even extra vehicle/installationteams. A list of all possible options I have explored are detailed below: Original Plan (No Alterations)1Original Plan (Subsidy)Hot Salt Storage IncludedHot Salt Storage Included (Subsidy)1 Extra Installation Team2 Extra Transport Teams & 2 Extra Installation Teams2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)Hot Salt Storage Included & 2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy) 2.1 Schedule AnalysisThe project can be varied many different ways affecting its end date. Table.1 identifies the various optionsI have explored providing an insight into each potential option and the key dates throughout the project. Transport End Date of AllArraysInstallation End Date of AllArraysProject Build End DateOriginal Plan (NoAlterations)27/07/2015/11/2118/04/22Hot Salt Storage Included27/07/2015/11/2111/07/221 Extra Installation Team27/07/2031/05/2101/11/212 Extra Transport Teams &2 Extra Installation Teams29/06/2014/12/2017/05/21Hot Salt Storage Included& 2 Extra Transport Teams& 2 Extra InstallationTeams29/06/2014/12/2009/08/21 Table 1. simply identifies which option completes the building of the project the quickest. The option of ‘2Extra Transport Teams & 2 Extra Installation Teams’ is of course the quickest due to additional resourcesbeing available and allowing the installation and transport of all arrays to take place at once. The original1 Original Option = Government final financial proposal (€120 per MWh) + no extra teams or inclusion of hot salt storage.Student No. – XXXX MANU9M6 4plan doesn’t allow this as only one team is seen to be adequate for each process which leads to the delayin end date. Without taking finance into account, the ‘2 Extra Transport Teams & 2 Extra InstallationTeams’ option is so far the best option.2.1.1 Network DiagramsThe network diagrams are and excellent way of displaying the project as a whole, this can identify start andend dates of each task as well as the whole project. It can also show which tasks rely upon another andalso which can be carried out at the same time (See 5.1 Appendix 1). Another great aspect of the networkdiagrams are that they show the critical path. This essentially shows the tasks which drive the end date ofthe project build, these tasks are what the project relies on for other tasks to be done and have influenceon the end date. This path is highlighted in red on the network diagrams and vary depending on the optionat hand. Although the option ‘2 Extra Transport Teams & 2 Extra Installation Teams’ proves to be quickestwhen it comes to completion time, there is less room for error when carrying out the tasks. As you can seethe critical path covers a lot more tasks before reaching the final tests this means it is reliant upon moreactivities and if something were to go wrong or delayed in any one of these activities on the critical path,there would be a negative impact to the end date.Although the critical path slightly varies amongst the different options it tends to stick to the sameactivities such as the building, transporting and installing of the arrays. The infrastructure plays no role onthe critical paths unless these options were drastically altered, the same goes for the installation of theturbine, generator, steam boiler and heat condenser. Although the testing of the hot salt storage doesplay a role in the project builds end date, meaning it is in the critical path when included.2.1.2 Gantt ChartsThis is another great method of scheduling and can convey clearly what tasks need to be done and when.Much similar to the network diagrams you can see the critical path and notify key differences whenchanging resource availability (See 5.2 Appendix 2). Each option provided has a both a network diagramand gantt chart to support Table.1 and further provides detailed information on the critical path for eachoption and individual activity start and finish dates. The gantt chart further provides evidence of theoption I have already provided is the best going forward based upon scheduling, even at the expense of agreater critical path and more room for error which is evident this option is the best going forward as theproblems that may arise from a greater critical path may be controllable or affect the project regardless ofthe critical path.2.1.3 WorkforceThis schedule analysis for all options relies on the workforce working a 5 day week with no holiday periods.These dates will only be met under the assumptions that employees attend work and that there aresufficient levels of staff to complete the work on time and to the correct quality/standards.2.2 Financial AnalysisAlthough the schedule analysis proved the option of ‘2 Extra Transport Teams & 2 Extra Installation Teams’to be the best fit so far, that doesn’t necessarily mean it’ll prove the best option financially. There aremany avenues to explore such as the inclusion of the salt storage and the benefits it brings even at theexpense of a delayed project end date. Also I will explore the sensitivity of key parameters and the effectthey may have on the project for various options as well as an investment appraisal conducted on eachoption.Student No. – XXXX MANU9M6 5Table.22.2.1 Investment AppraisalThe investment appraisal2 (See 5.3 Appendix 3) shows detailed information suggesting if each option isworthwhile or not. Examples of some of the investment appraisals are included, showing return oninvestment (ROI) as well as payback period, total profit and the internal rate of return (IRR). The optionsincluded are what I believe to be the best options for the project as a whole, with at least one optionshowing with and without a subsidy. Although I feel the subsidy should be included as it helps with IRR.2.2.1.1 Internal Rate of Return (IRR)As the finance director notes profit doesn’t need to be large but an IRR of at least 8% needs to be achievedand at this site (Orgos), all the options I am providing you with achieve just that (See 5.4 Appendix 4). Thisidentifies that the ‘Original Plan (No Alterations)’ will take the lowest IRR at 8.61% whereas the highest is ‘2Extra Transport Teams & 2 Extra Installation Teams (Subsidy)’ at 10.79%. Interestingly the options with thesubsidy included that the government were originally providing, generate a higher IRR percentage acrossall options. Regardless of which option we choose to move forward with, I feel now that the negotiation ofincluding the subsidy along with the price of €110 per MWh is critical if the IRR has more importance overprofit, this will return our investment more quickly.I’m unsure of the intentions of the finance directors plans with the 8% IRR target but this means it is apossible option to offer this as a discount. As all out IRR percentages are higher than 8% this means we willgenerate a positive net present value (NPV) regardless, meaning it is financially viable at an 8% test for alloptions. In fact for each option we could potentially offer discounts at anything up to and including ourIRR for that option as this number would generate a NPV greater than or equal to zero meaning atwhichever discount rate we suggest, the project is financially viable.2.2.1.2 Return on Investment (ROI)This is a relatively simple method of analysis identifying the projects gain or loss generated in relation tothe amount of money invested. Total Profit(€M)ROIPayback Period(Years)IRROriginal Plan (No Alterations)341.2541.23%118.61%Original Plan (Subsidy)283.1461.02%1110.02%Hot Salt Storage Included417.8781.35%119.21%Hot Salt Storage Included(Subsidy)360.3541.16%1110.56%1 Extra Installation Team358.7411.27%119.24%2 Extra Transport Teams & 2Extra Installation Teams363.8021.24%119.36%2 Extra Transport Teams & 2Extra Installation Teams(Subsidy)302.1901.03%1010.79%Hot Salt Storage Included & 2Extra Transport Teams & 2Extra Installation Teams(Subsidy)270.1900.83%119.07% 2 Assumption that Lease begins once project has been approved and therefore charged for this whilst transport and building ofarrays begins.Student No. – XXXX MANU9M6 6Graph.1Graph.2Table.2 shows that there isn’t much variation on the ROI with the exception of the ‘Hot Salt StorageIncluded & 2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)’ option showing below 1%.Therefore I would rule this out as an option. The same goes for the ‘Original Plan (Subsidy)’ as the ROI islow in comparison to the other options and although it has a relatively high IRR I feel there are otheroptions on the table that are available containing similar or better IRR’s as well as an improved ROI.Although the ‘2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)’ only gains 1.03% oninvestment I will keep it included for the time being as it shows the highest IRR rating which explains theshorter payback period.2.2.1.3 Payback PeriodThe payback period isanother very simplemeasure of financialperformance andconsiders the cumulativeprofit. Table.2 identifiesthe option of ‘2 ExtraTransport Teams & 2Extra Installation Teams(Subsidy)’ has theshortest payback periodof 10 years and theremaining options allhaving 11 years topayback. This makes this option more financially attractive as the investment is paid backquicker. Although I feel this is unfair to rule out all other options just yet as they all havedifferent characteristics, the only option we can rule out here is the same one without the subsidy. Thanksto the subsidy the payback period is shorter (See Graph.1) leading to the higher IRR percentage alsoidentified in Table.2.2.2.1.4 Total ProfitWith the remaining options wewill simply analyse total profit(See Graph.2). The graphclearly displays that the ‘HotSalt Storage Included’ optiongenerates the most profitwhereas the ‘2 Extra TransportTeams & 2 Extra InstallationTeams (Subsidy)’ produces theleast. With five options remainingwe can discard the ‘2 ExtraTransport Teams & 2 ExtraInstallation Teams (Subsidy)’option as it is roughly €50 millionworse off than the other options.I understand the finance directormentioned that we don’t need to produce a large profit but when the other measurements and-400-300-200-10001002003004001 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20Cumulative Profit (€M)Year2 Extra Transport Teams & 2 Extra Installation Teams2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)0 50 100 150 200 250 300 350 400 450Original Plan (No Alterations)Hot Salt Storage IncludedHot Salt Storage Included (Subsidy)1 Extra Installation Team2 Extra Transport Teams & 2 ExtraInstallation Teams (Subsidy)Total Profit (€M)Project VariationStudent No. – XXXX MANU9M6 7Table.3Graph.3comparisons are all so tight I feel this factor can help when making the right decision with which option to go aheadwith.2.2.2 Proposed OptionsBelow (Table.3) is a simplified version of Table.2 showing the remaining options. Based on the samecriteria I have already been using I will now look at the remaining options taking into account all factors atonce and at a glance of Table.3 the ‘Original Plan (No Alterations)’ option should next be ruled out. Notonly does it generate the lowest total profit but also the lowest IRR percentage in comparison to theothers. We can generate larger profits with other options as well as recover out investment quicker so itonly makes sense.Personally, I feel we should include the Hot Salt Storage and disregard the ‘1 Extra Installation Team’. Thiswould provide greater control of the electricity generated as well as allowing us to store the energy forwhen it is needed and not just when the sun is overhead. Also the inclusion of such technology attracts ahigher price to be sold at as the electricity supply is now seen to be more controllable.2.3 Sensitivity AnalysisA sensitivity analysis allows us to plan for any uncertainties that could potentially impact the project.These uncertainties can be applied to the investment appraisal to then see the effects it may have on theproject. Sensitivity Analysis can also be compared between options and through analysis, this can helpchoose the correct option for the project.For the final two optionsGraph.3 displays the sensitivityof each option to the actualgeneration of electricity. Thecost engineer notes that theactual generation should be80% and the graph shows thatboth options are above the 8%mark which is our target IRRaccording to our financedirector, which is great.Although the cost engineerfurther notes that the actualgeneration of electricity couldbe anywhere from 70-90%. Total Profit(€M)ROIPayback Period(Years)IRROriginal Plan (No Alterations)341.2541.23%118.61%Hot Salt Storage Included417.8781.35%119.21%Hot Salt Storage Included(Subsidy)360.3541.16%1110.56%1 Extra Installation Team358.7411.27%119.24% 0.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%70% 75% 80% 85% 90%Internal Rate of Return (IRR)Actual Generation of ElectricitySalt Storage Salt Storage Subsidy 8% MarkStudent No. – XXXX MANU9M6 8Graph.4Table.4The option of ‘Hot Salt Storage Included (Subsidy)’ is above the IRR target of 8% regardless of sensitivitywhereas the ‘Hot Salt Storage Included’ option fails to meet the target if the actual generation of electricitywhere to be only 70%. This leads to the subsidy option being more desirable so far.Graph.4 demonstrates thesensitivity each option has toprice. Again the ‘Hot SaltStorage Included (Subsidy)’option has a better overall IRRpercentage but does fall belowthe target IRR if the price was20% lower than we plan. The‘Hot Salt Storage Included’ fallsbelow the target IRR at just10% lower than the price weplan for that particular option.This shows that again the ‘HotSalt Storage Included (Subsidy)’is better but if we choose to goahead with this option we need to be careful when negotiating the price as we can’t got 20%under what we have prepared for with this option or we won’t meet our target IRR.These previous graphs show that both options are fairly sensitive to change, Table.4 notes othersensitivities to key parameters but in both cases they don’t harm the IRR ratings significantly. Salt StorageEstimate80%90%100%110%120%Site Lease p.a (€M)9.29%9.25%9.21%9.17%9.17%Operating Fixed Costs p.a (€M)9.41%9.31%9.21%9.11%9.01%Salt Storage SubsidyEstimate80%90%100%110%120%Site Lease p.a (€M)10.66%10.61%10.56%10.51%10.46%Operating Fixed Costs p.a (€M)10.79%10.68%10.56%10.45%10.33% Table.4 shows that 20% alterations both above and under both sets of fixed costs has no dramatic impacton their IRR percentages, in fact they all remain above the 8% target. These results don’t change enoughto impact my decision but they do show once again that the ‘Hot Salt Storage Included (Subsidy)’ optionprovides a higher IRR percentage throughout.2.4 Final DecisionThe Orgos location is great site for setting up the concentrated solar power project in Cyprus. After muchconsideration and analysis I feel the best option moving forward is to include the hot salt storage and try tonegotiate with the Cypriot government about the inclusion of the subsidy even if that means sacrificing10% of our planned price as it would still meet our target IRR of 8% (See Graph.4).This option proves to be one of the best as it is the second highest option when coming to total profit butalso IRR (See Table.2). This therefore satisfies our finance directors goal and then some, with the0.00%2.00%4.00%6.00%8.00%10.00%12.00%14.00%16.00%80% 90% 100% 110% 120%Internal Rate of Return (IRR)% Best Estimate (Price [€/MWh])Salt Storage Salt Storage Subsidy 8% MarkStudent No. – XXXX MANU9M6 9importance they place upon the IRR percentage it is well succeeded in this option as well as being able togenerate a large profit against some of the other options. Although the build takes the longest, we arerewarded in the long run for our patience and receive that quick return on investment and large profits(See both Table.1 & Table.2).Finally this option allows the energy to be supplied when there is demand due to the inclusion of the hotsalt storage. This has a massive impact on the ability to charge a big rate for the pricing due to theadvanced technology we will install.3.0 ConclusionAll options at basic level assuming there are no changes and all goes to plan will generate over our targetIRR. Although I feel to maximise the project the hot salt storage with the subsidy is the best optionavailable. This generates one of the highest IRR percentages as well as a great profit providing a decentreturn on our investment.4.0 RecommendationsDue to the option I believe is best taking us forward being the latest to finish, we could explore thepotential of a 6 working day week moving the projects build end date forward. Although this could befurther delayed if we were to account for Christmas holidays or even extreme weather.I also recommend that we try our best to negotiate a great deal on the subsidy as from my analysis you canclearly see it plays a vital role in boosting the IRR percentage upwards. Graph.4 shows how sensitive wecan be with price assuming the subsidy remains €50 million, I do not recommend we settle for anythingless than this when negotiating with the Cypriot government. I firmly believe this is the best option withthe project ahead and should move swiftly to put this option into action.Student No. – XXXX MANU9M6 105.0 Appendix5.1 Appendix 1 (Network Diagrams)5.1.1 Original Plan (No Alterations)5.1.2 Hot Salt Storage IncludedStudent No. – XXXX MANU9M6 115.1.3 1 Extra Installation Team5.1.4 2 Extra Transport Teams & 2 Extra Installation TeamsStudent No. – XXXX MANU9M6 125.1.5 Hot Salt Storage Included & 2 Extra Transport Teams & 2 Extra Installation Teams5.2 Appendix 2 (Gantt Charts)5.2.1 Original Plan (No Alterations)5.2.2 Hot Salt Storage IncludedStudent No. – XXXX MANU9M6 135.2.3 1 Extra Installation Team5.2.4 2 Extra Transport Teams & 2 Extra Installation Teams5.2.5 Hot Salt Storage Included & 2 Extra Transport Teams & 2 Extra Installation TeamsStudent No. – XXXX MANU9M6 145.3 Appendix 3 (Investment Appraisal)5.3.1 Original Plan (Subsidy)5.3.2 Hot Salt Storage IncludedStudent No. – XXXX MANU9M6 155.3.3 Hot Salt Storage Included (Subsidy)5.3.4 2 Extra Transport Teams & 2 Extra Installation Teams (Subsidy)Student No. – XXXX MANU9M6 165.4 Appendix 4 (IRR Graph)0.00%2.00%4.00%6.00%8.00%10.00%12.00%Internal Rate of Return (IRR)Project Variation

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